SPAA calls for action on annual contribution caps and excess contributions tax in Federal Budget submission


SPAA says superannuation caps must be returned to pre 2009 levels

The Self Managed Super Fund Professionals’ Association has today called for excessively low superannuation contribution caps to be restored to their pre-2009 levels, to allow people to legitimately save for retirement and for a sensible, workable solution for those who inadvertently breach superannuation caps and incur Excess Contributions Tax. The calls are contained in SPAA’s 2011 Budget submission.

“It is now widely recognised that the punitive penalty regime applying to excess superannuation contributions is in need of reform,” said Andrea Slattery, SPAA CEO. “The severity of Excess Contributions Tax (ECT), both in terms of the rate of tax and the manner in which tax is applied, is a significant issue currently confronting the sector.”

“SMSF members are disproportionately affected by ECT because they are the most highly engaged with their super and therefore the most likely to take advantage of legitimate opportunities to increase their retirement savings,” Ms Slattery said.

SPAA believes most instances of excess super contributions are made by mistake, not intention. And, the number of people inadvertently caught in the ECT net has increased since the 2009 Budget, when the concessional superannuation caps were halved to $25,000 a year for those under age 50 and $50,000 a year for those aged over 50. SPAA has called for the original pre-2009 caps to be restored.

“The reduced concessional contribution caps, together with the absence of adequate indexation, will deny many thousands of Australians, who typically have a greater financial capacity to save for their own retirement later in life, the opportunity to do so,” Ms Slattery said.

And, while SPAA in principle supports the Government’s proposed, permanent restoration of the $50,000 a year cap for the over 50s from 2012/13, SPAA does not believe this measure should be restricted to those with a less than $500,000 superannuation balance. Such a restriction, if imposed by Government, will only impose difficult, onerous and inefficient administration and reporting practices on funds, reminiscent of the previous reasonable benefits limit regime, Ms Slattery said.

“In addition, superannuation fund members who exceed their non-concessional contribution cap should have a genuine right to rectification and this should enable SMSF members to minimise their excess contributions tax liability,” Ms Slattery said. To facilitate this, the SIS Regulations should be amended to enable the voluntary refunding of the excessive portion of a non-concessional contribution back to the member.

And, to simplify super and reduce instances of unintended breaches of the contribution caps for members over age 65, the restriction which applies from age 65 to members who wish to bring forward two future years of non-concessional contributions, should be removed. This will enable the bring-forward rule to apply until age 75 consistent with the rule for non-concessional contributions which enables members to contribute up until the age of 75.

Separately, in the submission, SPAA has also called for adult children to be able to receive a superannuation death benefit from a parent tax free if it is left in an accumulation superannuation fund and not cashed out.

“In keeping with the spirit of our submission, we strongly encourage Treasury to consider the tax incentives provided to superannuation, in particular concessional and non-concessional annual superannuation contributions, against the backdrop of the Government’s own stated policy objective of reducing reliance on the age pension and promoting self-funded retirement,” Ms Slattery said.

A full copy of the submission can be found at the SPAA website here

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